💼 W-2, Self-Employed, or Investor? Choosing the Right Loan Program in Texas 🔑

🏦 Bank Loans vs. Non-QM vs. DSCR vs. SBA — Which Mortgage Loan Is Right for You? 📊

February 25, 2026•3 min read

🏦 Bank Loans vs. Non-QM vs. DSCR vs. SBA — Which Mortgage Loan Is Right for You? 📊

💼 W-2, Self-Employed, or Investor? Choosing the Right Loan Program in Texas 🔑

Bank Loans vs. Non-QM vs. DSCR vs. SBA — Which One Fits Your Situation?

Most borrowers don’t have a loan problem.
They have a fit problem.

As a mortgage broker in Katy, Houston, and across Texas, I don’t push products. I structure solutions. The key is matching the right borrower profile with the right underwriting model.

Let’s break down the framework clearly.

🏦 1. Traditional Bank Loans (Conventional / Agency)

Best For:

·W-2 income borrowers

·Owner-occupied primary residences

·Strong credit profiles

·Documented tax returns

How It Works:

Traditional bank loans (Fannie Mae / Freddie Mac conventional) rely heavily on:

·Tax returns

·W-2 income

·Debt-to-income ratio (DTI)

·Stable employment history

Strengths:

✔ Lowest rates
✔ Long-term fixed options
✔ No exotic structure

Limitations:

✖ Tax return write-offs hurt qualification
✖ Harder for self-employed borrowers
✖ Strict DTI guidelines

If you’re salaried and buying a primary residence, this is usually your cheapest capital.

💼 2. Non-QM Loans (For Self-Employed & Complex Income)

Best For:

·Self-employed borrowers

·1099 earners

·Business owners with large write-offs

·High-income professionals

How It Works:

Non-QM (Non-Qualified Mortgage) loans allow:

·Bank statement qualification

·1099 income analysis

·Asset depletion programs

Instead of relying strictly on tax returns, we use alternative documentation to determine income.

Strengths:

✔ Flexible underwriting
✔ Higher DTI tolerance
✔ Works for doctors, dentists, consultants, and entrepreneurs

Trade-Off:

Rates are typically higher than conventional.

But if your tax returns show low net income because of aggressive write-offs, this may be the only program that actually works.

🏢 3. DSCR Loans (For Real Estate Investors)

Best For:

·1–4 unit investment properties

·BRRRR investors

·Portfolio builders

·Cash-out refinance strategies

How It Works:

DSCR = Debt Service Coverage Ratio

Instead of qualifying you based on personal income, the lender qualifies the property.

If rental income covers the mortgage payment (usually 1.0–1.25 DSCR), you qualify.

Strengths:

✔ No personal income verification
✔ Scales for investors
✔ Great for refinances

Limitations:

✖ Higher down payment (usually 20–25%)
✖ Slightly higher rates than conventional

For investors in Houston, Katy, and Fulshear, DSCR is often the cleanest path to scale.

🏗 4. SBA Loans (For Owner-Occupied Commercial Property)

Best For:

·Business owners buying their own building

·Medical offices

·Retail storefronts

·Industrial owner-users

Programs like:

·U.S. Small Business Administration 7(a)

·U.S. Small Business Administration 504

Allow as little as 10% down in many cases.

Strengths:

✔ Low down payment
✔ Long amortizations (25 years)
✔ Competitive rates

Requirements:

·Business financials

·Personal guarantee

·Owner-occupancy (typically 51%+)

If you own a business in Texas and are paying rent, SBA financing can convert that expense into equity.

The Real Question Isn’t Rate — It’s Structure

Here’s the decision framework:

Borrower Type

Property Type

Best Fit

W-2 Employee

Primary Residence

Conventional Bank Loan

Self-Employed

Primary or Investment

Non-QM

Real Estate Investor

1–4 Unit Rental

DSCR

Business Owner

Owner-Occupied Commercial

SBA

The wrong loan structure can:

·Block future refinancing

·Create unnecessary prepayment penalties

·Limit portfolio growth

·Increase long-term capital costs

The right structure creates flexibility.

Why This Matters in Texas

Houston and surrounding markets are capital-driven.

Whether you’re:

·A first-time homebuyer

·A doctor relocating

·A BRRRR investor

·A business owner buying your building

Your loan strategy affects your 5–10 year trajectory.

I operate Medallion Funds as a brokerage platform — meaning I shop lenders to match your structure.

That’s the difference between a product pusher and a capital advisor.

Final Take

Bank loans, Non-QM, DSCR, and SBA are not competing products.

They are tools.

The question is not “Which one is best?”
The question is “Which one fits your situation?”

If you want a structure conversation instead of a rate quote, let’s talk.

— Bill Rapp
Medallion Funds | Mortgage & Commercial Capital

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Bill Rapp - Commercial & Residential Mortgage Broker

Whether you're a first-time homebuyer, a seasoned investor, or a business owner with ambitious plans, securing the right financing is crucial. At Medallion Funds, we take the guesswork out of mortgages, offering a comprehensive suite of residential and commercial loan options to fit your unique needs. Looking for Your Dream Home? We understand the excitement and challenges of navigating the residential real estate market. Our experienced mortgage brokers will guide you through every step, from pre-qualification to closing. We offer a variety of loan programs to suit your financial situation, including: • Fixed-rate mortgages: Offering stability with predictable monthly payments. • Adjustable-rate mortgages (ARMs): Providing competitive rates for a set period. • FHA loans: Making homeownership accessible with lower down payments. • VA loans: Rewarding veterans with attractive rates and flexible terms. Investing in Your Business Future? Growth often requires capital, and we can help you unlock the potential of your commercial property. Our brokers specialize in a wide range of commercial loan options, including: • Purchase loans: Financing the acquisition of new buildings or land. • Construction loans: Facilitating the development of your project. • Refinance loans: Restructuring your existing mortgage for better terms. • SBA loans: Providing access to government-backed financing for qualified businesses. The Medallion Funds Difference: We go beyond simply finding a loan. We take the time to understand your goals and develop a personalized strategy. Here's what sets us apart: • Expertise: Our brokers have a deep understanding of both residential and commercial lending. • Competitive Rates: We leverage our strong lender relationships to secure the best possible terms. • Streamlined Process: We handle the paperwork, keeping you informed every step of the way. • Exceptional Service: We're committed to providing you with a positive and stress-free experience. Ready to Take the First Step? Contact Medallion Funds today for a free consultation. Let's discuss your financing needs and help you achieve your dreams!

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